All too often, the light at the end of the tunnel is nothing more than a train coming the other way. And the oncoming train, driven by the Greeks, has finally crashed into Brussels-Central railway station.

The price of insuring Greek debt suggests it has fallen to junk. Far worse, as described by Gillian Tett in The Financial Times this morning, http://bit.ly/c7gqRz, the European Central Bank has taken Greek debt of all shapes and sizes onto its balance sheet to keep the country funded. Following the collapse of Lehman Brothers the ECB even agreed to accept paper with a rating as low as BBB minus as opposed to its norm of A minus.

Whether or not this amounts to an infection in the eurozone similar to sub-prime is a moot point. But enough people believe this is case to make the fear in the capital markets feel real.

Where do we go from here? UBS strategists say the sums behind Greece’s existing budget cuts do not add up. In due course, its government will no doubt go cap in hand for more handouts from Brussels, with Portugal and Spain next in line.

But deferring the problem, yet again, will solve nothing. The damage from the Brussels train wreck is too serious. We are in territory where the citizens of Europe can expect really painful cut backs and tax rises to keep the euro alive. Street protests and strikes are inevitable. But there is no alternative.